Abbott's ABT growth is backed by strong improvement in global Core Laboratory Diagnostics sales, led by continued strong adoption of the Alinity family of diagnostics systems and testing portfolios. Within the Nutrition business, the company is driving robust growth in Adult Nutrition. However, dull macroeconomic scenarios and currency fluctuations may restrict Abbott’s growth potential.
In the past year, this Zacks Rank #3 (Hold) company’s shares have risen 22.7% compared with the industry’s 32.1% growth and S&P 500 composite’s 39.4% increase.
The leading at-home healthcare company has a market capitalization of $198.73 billion. Abbott beat on earnings in each of the trailing four quarters, delivering an average surprise of 1.64%.
ABT’s Tailwinds
Strong Prospects Within Core Diagnostics: Abbott continues to expand its Diagnostics business. The company is particularly gaining from the strong adoption of its market-leading systems and demand for testing platforms. In September, the company announced a new partnership with the Big Ten conference to help boost the U.S. blood supply through a blood donation competition. ABT is also progressing with its Alinity family of diagnostics.
In the third quarter of 2024, total diagnostics organic sales (excluding COVID testing) grew 4.8% year over year. Excluding COVID-19 testing-related sales, global Core Laboratory Diagnostics sales increased 6.5% on an organic basis, led by continued strong adoption of the Alinity family of diagnostics systems and testing portfolios. Point of Care Diagnostics sales rose 6.1% organically.
Sales Recovery Within Nutrition: Despite some ongoing softness in a few international markets for pediatric products, the overall Nutrition business is particularly expanding on strong global demand for the company’s adult nutrition products. In the third quarter of 2024, ABT reported 3.4% organic growth within this business, backed by strong 9.1% growth in Adult Nutrition. This was led by strong sales of Ensure, the company’s market-leading complete and balanced nutrition brand.
International adult nutrition registered high single-digit growth on the back of strong market adoption of ABT’s Ensure and Glucerna brands. Within Pediatric Nutrition, the company reported 12% organic growth in the United States on a year-over-year basis, favored by continued market share gains in the infant formula business in this region.
ABT’s Headwinds
Choppy Macro Environment to Weigh on Margins: The challenging macroeconomic scenario in the form of the ongoing complex geo-political situation globally, specifically where Abbott operates, is causing higher-than-anticipated rise in expenses in terms of raw materials and freight. Industrywide, it has been seen that the deteriorating global economic environment is reducing demand for several MedTech products. This has resulted in lower sales and reduced product prices with an increase in the cost of goods and operating expenses for the MedTech companies’ businesses.
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In the third quarter, Abbott incurred a 2.1% increase in the cost of products sold (excluding amortization expense). Selling, general and administration expenses were up 6.3% year over year.
Foreign Exchange Translation Affects Sales: Foreign exchange is a major headwind for Abbott because a considerable percentage of its revenues comes from outside the United States. The strengthening of the euro and some other developed market currencies has constantly been hampering the company’s performance in the international markets. In the third quarter of 2024, foreign exchange had an unfavorable year-over-year impact of 2.5% on sales.
Estimate Trends
In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has remained unchanged at $1.34 per share.
The Zacks Consensus Estimate for revenues is pegged at $42.01 billion, indicating a 4.7% increase from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Phibro Animal Health PAHC, Haemonetics HAE and Baxter International BAX. While Phibro Animal Health sports a Zacks Rank #1 (Strong Buy) at present, Haemonetics and Baxter International carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Phibro Animal Health’s earnings are expected to increase 31.9% in fiscal 2025. Its shares have surged 122.3% compared with the industry’s 33.8% growth in the past year. PAHC’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average surprise being 4.1%.
Haemonetics has an estimated fiscal 2025 earnings growth rate of 15.4% compared with the industry’s 11.6% growth. Shares of the company have lost 15.2% against the industry’s 33.8% growth in the past year. HAE’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 3.5%.
Baxter International has an estimated 2024 earnings growth rate of 13.9% compared with the industry’s 11.6% growth. Shares of the company have surged 15.9% compared with the industry’s 33.8% growth in the past year. BAX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.7%.
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